In Vancouver, Canada, they have become known as “zombie ­suburbs" – inner city areas dom­inated by new apartment de­velopments, which despite their wealth and population ­density have failed to thrive. They are not dead, but like the zombie, only half-living.

Canadian urban planner Andy Yan coined the phrase to try to explain the effect a large inflow of offshore money, mainly from China, was having on parts of Vancouver.

He studied the Coal Harbour area and found that 25 per cent of the apartments were unoccupied for much of the year.

“These places have the density of Manhattan, yet the retail shops and restaurants on the ground floor are struggling," he told AFR Weekend.

Anecdotes such as this and the accompanying surge in property prices were part of the reason Canada scrapped its so-called “millionaire visa scheme" in February.

Just a few weeks later Canberra took the opposite approach and sought to speed up approvals for a similar scheme in Australia known as the Significant Investor Visa.

Figures released by the federal government on Tuesday showed that 343 visas have now been approved under the program and another 602 people are in the queue. If all these are approved, that will generate $4.7 billion in funds flowing into Australia, as each visa holder is required to invest $5 million into an approved investment scheme for four years, in return for permanent residency.

It’s an impressive number for capital-starved Australia and is likely to grow substantially, yet the Canadian experience should motivate politicians and urban planners to look behind the headline figures.

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Canada, which began its experiment with economic migration in 1986, has a mixed story to tell.

From Yan’s point of view, constant evaluation of the program is critical. He said one consideration in stopping the Canadian scheme was that it had never been properly studied. “We never evaluated if economic migration made sense," says Yan, who works for Bing Thorn Architects and sits on Vancouver’s City Planning Board.

That left many grasping at anecdotes to try to explain what was happening in Vancouver and if it was a positive or negative for the city.

Yan’s research suggests the economic migration program increased the city’s rental stock, along with allowing for better urban design and amenities like daycare centres and parks.

But it has also played a part in making Vancouver second only to Hong Kong on the list of the world’s least affordable cities to buy a house, according to Demographia, with Sydney fourth and Melbourne sixth.

In attaining this unwanted accolade, house prices in Vancouver have become completely disconnected from wages.

Direct link with China

Robin Wiebe, a senior economist at the highly respected Conference Board of Canada, laid out the numbers and found a direct link with China.

“Despite a decent local economy and favourable demographics, Vancouver’s housing market was relatively sluggish during the 1990s," he wrote in a research paper.

He said real estate prices grew at an annual rate of just 3 per cent over the decade to 2000. In the following decade, according to Weibe, prices doubled, including an annual rise of 20 per cent in 2006 alone.

“Casual observations and statistical tests both hint that China’s influence rivals that of three key domestic factors: Vancouver’s population growth, changes in employment and Canadian mortgage interest rates."

In his research Weibe finds a link between China’s GDP growth and price rises in Vancouver, but others like Yan also see other factors at work.

Yan talks about the rise of Vancouver and more recently Sydney and Melbourne as “hedge cities". That is, cities where wealthy Chinese and other nationalities buy property as an insurance policy against things going wrong at home.

Yan speculates this is one reason why “house prices in Vancouver have completely decoupled from wages".

And there are now signs of this in Australia, where much of the Chinese buying has been concentrated around inner city suburbs close to universities.

Data released by the Australian Bureau of Statistics on Wednesday showed wage growth at a record low of 2.6 per cent for the year to June 30.

Yet on the same day the ABS said house prices had risen 10 per cent across Australia, led by a 15.6 per cent rise in Sydney and 9.3 per cent in Melbourne.

No one is suggesting this decoupling of house price and wages in Australia is entirely driven by Chinese buying and certainly not due to the Significant Investor Visa Scheme, which is still in its early stages.

But even Reserve Bank governor
Glenn Stevens
, a man not known for sensational statements, has said the effect can’t be entirely discounted.

He said cashed up Asian buyers, mainly students, were “quite prominent" in inner city areas and had an effect on “asset prices and the exchange rate".

Stevens said he had reached this conclusion partly by noticing ads for Australia property while passing through Singapore.

This suggests even the country’s most sober economist is relying somewhat on anecdotes rather than analysis, which is exactly what the Canadians have warned against.

One of the first points made in a report released earlier this month by stockbroking firm CSLA was the lack of “hard data" on ­Chinese investment in the Australian housing market.

Everyone is still coming up with their best guess.

One of the more credible is Credit Suisse, which estimates Chinese buyers are currently purchasing 12 per cent of all new homes in Australia, after overtaking the United States as the number one investors in local real estate.

This lack of hard data is a constant in the Canadian experience, but one person who has studied the field more than anyone is David Ley, a professor at the University of British Colombia, who holds the country’s research chair in geography.

His blunt message for Australia is: Don’t expect much beyond the upfront payment from the Significant Investor Visa.

“The wider economic benefits for Canada have been much smaller than expected," he said. “There has not been a serious effort to develop economic projects."

This is backed by a startling number that shows those who have entered Canada via its investor visa program pay less tax than any other immigrant group, including refugees.

The issue is that this new wave of economic migrants is vastly different from those who came before them.

Seeking a passport and its protection

They are seeking a passport and the protection this provides, rather than a new place to live.

The experience in Canada is that those on the investor visa keep their economic interests in China and use cities like Vancouver and Toronto as a second home.

“It [the investor visa] was good for luxury car dealers, the real estate industry and those selling household items," says Ley who authored the book Millionaire Migrants.

“But the broader benefits were much smaller than expected."

Australia is likely to face many of these issues, as the Significant Investors Visa requires immigrants to only spend 40 days each year in the country.

“That sounds like a summer holiday to me," Ley says.

It should be noted, however, that the upfront payment in Australia is far larger than what Canada demanded.

Under its program applicants were asked to provide the Canadian government with an interest free loan of $C800,000 ($787,000) over five years and have minimum assets of $C1.6 million.

In scrapping the scheme the government said; “We believe those who want to come to Canada should live here, pay taxes here and invest their money directly in the Canadian economy".

“It has significantly undervalued Canadian permanent residency," a government spokesperson said.

Such a conclusion will not be available to Australia for some years.

According to CLSA the economic benefits from surging Chinese interest in Australia is likely to be relatively narrow.

It identifies property groups such as
Mirvac
,
Lend Lease
and
Goodman
as the biggest winners, along with construction materials company
Fletcher Building
.

This comes back to the motivation behind the decision to seek Australian permanent residency.

According to CSLA more than 65 per cent of migrants cited their children’s education as the main factor, followed by Australia’s clean environment.

Just over 10 per cent of respondents cited “business investment" as a factor.

Put simply, we can expect to mirror the Canadian experience with a construction boom that, according to CSLA, will run for the next six years.

But the bigger question is whether will also see the rise of “zombie suburbs" and runaway house prices without benefits for the broader economy.